Richard Hotchkis, W.S., Trustee on Bertram, Gardner & Co's Bankrupt Estate v. Royal Bank [1797] UKHL 3_Paton_618

UKHL
Richard Hotchkis, W.S., Trustee on Bertram, Gardner & Co's Bankrupt Estate v. Royal Bank
[1797] UKHL 3_Paton_618
The Royal Bank of Scotland found entitled to retain stock of an insolvent proprietor, for payment of debts due to the Bank by a Company of which he was a partner, against the trustee on the bankrupt estate.May 31, 1737.Adam Keir was a partner of Bertram, Gardner & Co., bankers in Edinburgh, who having failed in 1793, the appellant was appointed trustee on their sequestrated estates. In proceeding to make available the estate of the company, as well as of the individual partners, he found that Mr. Keir

Page: 619 ↓

“That no proprietor who is or shall become debtor to the bank, shall be allowed to transfer his stock, or any share thereof, but in the presence of a Court of Directors, to the end each Court of Directors, if they think fit, may stop such transfer, until such proprietor find security to the bank for what he owes, to their satisfaction.”
3. Independently of this bye-law, the bank had a right of retention, by the nature and constitution of their company, whether viewed under the common law of Scotland, or upon the special privileges conferred by acts of Parliament and Royal charters. In answer to this defence, it was maintained by the appellant, that neither by the common law, nor by the special powers in their charters, had the bank, as a corporate body, a lien on the stock of the individual members, to the effect of pleading retention against the right of the bankrupt member's trustee. That the bye-laws were ultra vires of the powers conferred by their charters: and that at all

Page: 620 ↓

Feb. 28,1797.Mar. 11,1797.The Court, on report of the Lord Ordinary, on informations, of this date, sustained the defences ; and, on reclaiming petition, adhered.Against these interlocutors the present appeal was brought.Pleaded for the Appellant .—The bank has, at common law, no lien or right of retention over the stock belonging to the stockholders for debts due by them to the corporation. For these they must rank against their individual estate as creditors. It is only under their own bye-law that they can claim such a right of retention; but although the bank had, by their charters, the general power of making such byelaws, yet it is only under condition that such “bye-laws may not be contrary to the intent and meaning of their charter, or repugnant to the laws of his Majesty's realm.” But the bye-law in question, supposing in its import it gave a right of retention in the circumstances here pleaded, is unwarranted by the bank's own charter; and also inconsistent with the transferable nature of the stock. The only case in which the charters give a right of retention to stop transfers of stock and payment of dividends, is the case where the stockholders are in arrear of calls; which must be construed to be the utmost limit to which the bank can plead their right of retention. But further, in the special circumstances of this case, even if such a right were competent to them, it cannot be pleaded, because the debt due to the bank is not a debt due by Mr. Keir, the proprietor of the stock; but a debt due by Bertram, Gardner & Co.Pleaded by the Respondents .—At common law the bank has a right of retention, because, according to the law of Scotland, when a person is disabled by bankruptcy from discharging the obligations he owes, payment or transference cannot be demanded of any money which that other owes him, either by himself or by any one claiming in his right. The solvent person is entitled to compensate, and retain for his payment and security, any effects of the bankrupt legally placed in possession within the statutory period. Nor is there any distinction in this respect between a private copartnership and a corporation. The bye-law alluded

Page: 621 ↓

After hearing counsel, it was

Ordered and adjudged that the said interlocutors be affirmed.Counsel: For the Appellant, W. Grant, Wm. Adam, John Clerk. For the Respondents, Sir J. Scott, W. Alexander.